IssueAlert Emerging Technologies ~ August, 2003

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Outsourcing Customer Care Increases Among Municipal Utilities
By Jon T. Brock, Chief Operating Officer, UtiliPoint

[News Item from PRNewswire] ORCOM, a leading provider of outsourced customer care and billing services for water, wastewater, gas and electric utilities, announced that Metropolitan Sewer District of St. Louis (MSD) has selected ORCOM for outsourced customer care and billing services. MSD chose ORCOM's E-CIS Blue, a proven, highly flexible customer management service, to replace its 20-year-old billing and collection system, which was not providing the operational efficiencies needed to maintain a high level of customer satisfaction.

Analysis: Recently an Emerging Technology IssueAlert authored by my colleague Christopher Perdue stated that the customer care industry was beginning to slowly pick up in the utility industry. Perdue stated that “I would watch for more action from natural gas distribution, water, and municipal utilities over the next 12 months in both the licensing and outsourcing areas of customer care.” This is one such announcement and it validates analysis resulting from an UtiliPoint survey performed earlier this year.

The Deal
Metropolitan St. Louis Sewer District, otherwise known as MSD was created by the citizens of St. Louis city and county in 1954 to empower, within one agency, the responsibility for collecting and treating area wastewater and stormwater. MSD currently serves a population of approximately 1.4 million within 524 square miles, currently operates 8 treatment facilities, and is responsible for operating and maintaining 9,000 miles of sewers. With ORCOM's E-CIS Blue service, the public agency will serve approximately 428,000 accounts in the greater St. Louis area.

Services provided by MSD include: sanitary sewer maintenance, stormwater sewer maintenance, floodwater control, pump station operation & maintenance, monitoring of industrial waste, issuance of pretreatment discharge permits, engineering design and specification, construction of sewer lines, plan review and approvals, issuance of connection permits, speakers' bureau, public education, and customer service.

MSD provides customer care for the waste and sewer services for the City of St. Louis. The actual water customer care is provided by another ORCOM client, American Water Works (AWW). AWW does not outsource its customer care to ORCOM, instead, it utilizes ORCOM's system E-CIS to provide services to its 3 million water customers. Electricity is provided by AmerenUE and gas is provided by Laclede Gas Company. That's correct, citizens in St. Louis get a separate bill for electric, gas, water, and sewer. ORCOM solutions will now enable the water and sewer bills.

The deal that ORCOM has made with MSD consists of several customer care functions. Billing is hosted in ORCOM's Rochester, NY office with complete backup capability being handled in Nebraska. Remittance processing is handled in the Nebraska office. The customer care will remain in MSD offices in St. Louis. A requirement of the deal was that the call center jobs not be moved out of state. Therefore, while the call center employees will be employees of ORCOM, they will work in the same offices they always have. ORCOM does have its own call center in Nebraska but will not be utilizing that facility for the MSD deal.

E-CIS Blue
ORCOM released what it calls E-CIS Blue specifically for the water industry in March of this year touting it as a customized version of its traditional customer information system (CIS) called E-CIS. ORCOM's E-CIS Blue services include: a rapid, flawless implementation, personalized customer contact services, billing services, credit and collection services, streamlined customer contact management, and online customer care.

Additional E-CIS Blue features include:

MSD is ORCOM's most recent customer to make use of the E-CIS Blue service offering and it follows others such as Washington D.C., Truckee Meadows (City of Reno), and City of Austin, TX, all of whom were references for MSD. ORCOM confirms that 60% of its prospects lie in the municipal sector.

The Numbers Don't Lie
In the most recent UtiliPoint multi-client survey completed in February of 2003, approximately 48 percent of 304 utility respondents in Canada and the U.S. indicated that they have either outsourced a function, or that they were planning to outsource one in the next two years. This was higher than expected, since from the previous survey only 28 percent were considering outsourcing a function of customer care.

Analyzing this same information by company type reveals that cooperatives and municipalities are much more receptive to outsourcing than they were a year ago.

Source: UtiliPoint International, Inc.

The functions of customer care listed as potential for outsourcing included:

It is a fact that the municipals and cooperatives have an increased interest in outsourcing customer care year-over-year from 2002 to 2003.

"Municipal utilities are leading the trend toward outsourcing, followed closely by mid-size IOU's," said Jamie Biddle, President and CEO of ORCOM. "Tight budgets, ever increasing operating costs and a desire to improve customer service are driving the trend, along with the need to optimize business processes and improvements."

Recent conversations with municipal utilities confirm the fact that infrastructures are aging and in need of replacement. This applies not only to pipes in the ground and meters, but also to systems that run the utilities. MSD is replacing a 20 year-old system. As municipals begin to entertain the replacement of the aging infrastructure, outsourcing of customer care will get more attention than it has in the past.